Rampart Energy Limited 1 ASX:RTD

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1 Arrowhead Code: Coverage initiated: This document: Fair share value bracket: Share price on date: Analyst Team Vishal Pasari Market Data 52-Week Range: Average Daily Volume: Market Cap. on date: AU$0.11 to AU$0.45 i AU$0.061 ii Mohanarangam Purushothaman Mohanarangam.purushothaman@arrowheadbid.com Estimated Blended Value (in AU$) Value Bracket DCF Valuation (Value/Share) AU$0.003 AU$0.075 iii 1,780,788 iv AU$15.94MM v Comp Valuation (Value/Share) Weighted Value/Share Low High Fiscal Year (FY) Summary 1st Oct 30th Sep Rampart Energy Ltd. (RTD) is an ASX-listed company focused on exploration and development of oil and gas assets. Currently, RTD has a flagship project focused on dual play conventional and non-conventional oil in the North Slope, Alaska. RTD can earn an interest in 42,350 acres (net) in the North Slope; currently, the overall project is operated by Royale Energy Inc. (NASDAQ:ROYL). Under the terms of the farm-in agreement RTD has the right to increase its ownership up to a 75% WI across two areas western and central blocks by meeting certain performance milestones (property payments, 3D seismic acquisition and drilling of two wells). The North Slope of Alaska is a proven prolific oil and gas province, home to the largest oilfield in the US (Prudhoe Bay). It once contributed over 25% of the daily production of the entire country. According to the U.S. Geological Survey (USGS), the North Slope has a potential (technically recoverable) estimate of 849MMbbl to 2,000MMbbl with 50% to 5% probability, respectively. An independent study on RTD and ROYL s acreage highlights a best estimate of 167MMbbl of recoverable oil. The North Slope has existing pipeline and refinery infrastructure and other oil service firms serving the major exploration companies in the region. As Company: Ticker: Headquarters: Managing Director: Website: Rampart Energy Limited ASX:RTD Adelaide, South Australia Torey Marshall one of the early movers, RTD can secure the currently underutilized pipeline and refinery capacity as it nears development stage. The oil extracted from the region is light to medium crude based on API gravity (23 to 42); hence, refiners assign a low discount to the oil. The region has a supportive gas and electricity market with gas prices between US$6/mcf and US$20/mcf. The extracted oil is used for domestic electricity generation and for refining into petroleum products that are sold through the seaborne markets via the port of Valdez. The gas pricing, API gravity score, electricity market and the export market secure the end-product market demand for RTD s output. The Alaskan government supports and encourages exploration and development in the North Slope by offering cash rebates and terms attractive for exploration in the region. More importantly, these incentives are not based on the success of the exploration program. In December 2013, RTD secured an ACES Exploration Rebate Working Capital Facility which will significantly reduce the exploration costs to shareholders, as future exploration expenditure that qualifies will be paid for in large part by repurchase of tax credit certificates issued to the company by the Alaskan Government. Critically, the company will not have any residual debt as the ACES credits will automatically reduce the balance to zero once all have been received. RTD is also on track to commence 3D seismic acquisition in early 2014 on the western and central blocks. To partly fund the program, the company has already raised AU$4.45MM through share placement and exercise of options. Arrowhead believes that RTD has enormous growth potential with an average risk profile within the oil & gas exploration sector. Based on the intrinsic valuation of the North Slope project, Arrowhead believes that RTD s fair share value lies in the AU$0.11 to AU$0.45 vi bracket. Rampart Energy Limited 1 ASX:RTD

2 Table of Contents Company Presentation... 3 News... 5 Listing Information... 6 Contacts... 6 Major Shareholders... 6 Management and Governance... 7 Assets and Projects... 8 Technologies and Markets Project Risk Profile Analysis Risk Parameters Definition Peer Valuation and Risk Profile Value Analyst certifications Discounted Cash Flow and Resource Based Valuation Notes and References Rampart Energy Limited 2 ASX:RTD

3 Company Presentation Rampart Energy Limited (RTD), an ASX listed company, focuses on the acquisition and development of energy assets globally. The company looks for conventional and non-conventional oil and gas opportunities within mature provinces that is proximal to existing infrastructure and has a healthy investment environment. RTD can earn into 42,350 acres (net) in North Slope Oil & Gas Project in Alaska and retains an interest in the Fiale Geothermal Project in Djibouti. The project in North Slope is operated by Royale Energy Inc (NASDAQ:ROYL) and RTD has right to increase its ownership in two separate blocks to a 75% WI level by meeting certain milestones. RTD is likely to divest its remaining assets and concentrate on the North Slope project. In June 2013, RTD completed the placement of 232.3MM fully paid ordinary shares at AU$ and convertible loan of AU$1.2MM for the acquisition of Alaskan Project. It also completed an AU$1.75MM equity placement in August 2013 to acquire of 5,800 acres of prospective acreage contiguous to the Western Block. In November 2013, the company raised AU$4.45MM through private placement and exercise of unlisted options. The proceeds will be used to fund its 3D seismic program, scheduled to commence in early As part of the share placement, RTD raised AU$3.58MM in two tranches of AU$2.93MM and AU$0.65MM. The company also raised AU$0.93MM through the exercise of 15.5MM unlisted options at a strike price of AU$0.06. In December 2013, the company secured an ACES-based credit facility which will significantly cover exploration costs for seismic and drilling program, which will reduce the exploration expenditure net to shareholders up front, significantly increasing the leverage into this play. Portfolio and Premiums North Slope, Alaska is one of the top U.S. shale plays: The project is in North Slope Alaska, U.S. s second top shale play in terms of technically possible oil production (according to USGS). The coexistence of shale and conventional oil deposits is the highlight of the region. The United States Geological Survey (USGS) estimates potentially recoverable oil in the range of 849MMbbl to 2,000MMbbl, with 50% to 5% probability, respectively. Less well known, but of increasing importance is the shale oil potential of the North Slope. It stands to reason that the source of the oil in the supergiant fields is itself quite an intriguing target given the recent successes in the Bakken and Eagleford plays in the lower 48 states in particular. Moreover, the target oil is light to medium crude based on API gravity (23 to 42) supporting low discount assigned by refiners. Infrastructure at North Slope, Alaska Rampart Energy Limited 3 ASX:RTD

4 The stable Alaskan government offers incentives for exploration: The Department of Natural Resources in Alaska encourages exploration and development on the North Slope, with exploration tax credit program for seismic and exploration well costs and other approved capital expenditures and reimbursements for third-party exploration expenditure that are not contingent on the success of the program. RTD attracts potential reimbursements for third-party exploration expenditure of around 40% to 85% for the next two calendar years; followed by 75% in 2016 and 35% thereafter. Company s qualify for these rebates and credits only after a strict technical criteria, in addition to spatial criteria that are applied; with RTD and ROYL s acreage under consideration it be believed to be eligible for the maximum under the program. Existing infrastructure and good economics support faster time to production: The region has pipeline and refinery infrastructure in place with existence of major exploration companies operating in the same region. As RTD moves into production, it can capitalize on the Trans Alaskan Pipeline that is currently operating at just 42% of its capacity. The region also has refineries nearby, namely; Valdez, North Pole, Prudhoe Bay BP, and Prudhoe Bay Conoco, with a refining capacity of more than 228,000 bbl/dy. Strong management team: The company has a reputable management team with demonstrable track records in growing a business. We believe with the strong technical and management background of the directors along with the expertise of Royale, RTD will be able to pull together project funding for infrastructure projects and take through a full project cycle for shareholders. For details, please refer to the Management and Governance section. Portfolio and Risks Initial stages of project lifecycle: RTD is in initial stages of its project life cycle, and the project is expected to be commissioned by 2016, at the earliest. Though, the potential reserves, economics of development, presence of big players at North Slope give positive indications; the failure to execute as planned remains a concern. Financing is crucial for securing the acreage and high equity holding in project: The North Slope project will require a significant development capital outlay in coming few years for exploration and development of the project. Furthermore, the equity ownership of RTD is linked to meeting certain milestones with respect to project timelines and payments. In November 2013, the company raised AU$4.45MM through private placement and exercise of unlisted options to fund its 3D seismic program scheduled to commence in early In December 2013, the company secured an ACES Exploration Rebate Working Capital Facility with a major international institutional group which will significantly cover exploration costs for both seismic and drilling program. The facility will also reduce up front equity costs while leaving the company with no debt after it s settled as the capital provided will be paid back through the Alaskan Government s repurchase of tax credit certificates. The security provided by the AAA-rated Alaskan Government s ACES credits and potential farm-outs will stand in favor of RTD. For a detailed risk assessment, please refer to the Risk profile analysis section. Corporate Strategy RTD looks for conventional and non-conventional oil and gas opportunities with established infrastructure and a healthy investment environment. In line with its strategy, the company has entered the North Slope of Alaska which matches its key criteria, including excellent existing infrastructure. RTD plans to carry out 3D seismic mapping on the Western and Central blocks to gain WI according to the agreement with Royale by in January 2014 and targets to finish by May Under the agreement, RTD can earn up to 75% in Western Block by March 31, 2015 by completing the 3D seismic, making US$1.95m in additional payments plus drill two wells, and 75% in the central block by completing the 3D seismic survey and paying US$1.7MM by June 3, The company is currently on track to commence the 3D seismic program in early Rampart Energy Limited 4 ASX:RTD

5 News ACES credit facility secured: On December 24, 2013, the company completed negotiations on ACES based credit facility which will significantly cover exploration costs for both seismic and drilling programs. The agreement provides for senior secured funding to the company based on the receivables due to be recovered through the ACES program in Alaska. At the completion of using the facility, the company will have no net debt as the capital provided by the facility will be paid back through the Alaskan Government s repurchase of tax credit certificates issued to the company. Capital raise: On November 26, 2013, the company announced AU$4.45MM capital raise through private placement (AU$ 3.5MM) and exercise of unlisted options (AU$0.93MM). As part of the share placement, the company issued 45MM shares in the tranche 1 of the private placement, raising AU$2.93MM at AU$0.065 per share. The company also raised AU$0.65MM by issuing 10MM shares in the tranche 2 of the private placement, which is expected to settle in early A further AU$0.93MM was raised through exercise of ~15.5MM unlisted options at a strike price of AU$0.06. Operational Update Nov 2013: On November 20, 2013, the company said that it is in negotiations on an ACES Exploration Rebate Working Capital Facility with several large international institutions and expects to secure the facility by December The facility is expected to significantly reduce the exploration expenditure, as up to 85% of the exploration costs are expected to be refunded through the Alaskan Government s AAA-rated ACES credits. The company is also focusing on getting the required approvals prior to the commencement of the drilling program, and, along with Royale Energy Inc., is in advanced stages of negotiations with seismic contractors. Consolidation of securities: On October 15, 2013, the company completed consolidation of its securities on the basis of one new security for each 15 securities held prior to the re-organization. Post the consolidation, the company has 200,753,770 ordinary issued securities. Potential EUR of up to 8,473bbl/acre in the United States: On September 04, 2013, the company announced the final shale oil resource estimates received from Netherland Sewell and Associates Inc. highlighting potential of their acreage in the North Slope of Alaska. The potential recovery rates seen in the United States shows a high Estimated Ultimate Recovery (EUR) estimate of 8,473bbl/acre and a mean of 3,995bbl/acre of in the context of better known plays. OOIP estimate of 7.2Bbbls at the North Slope: On August 22, 2013, the company announced the shale oil estimates received from Netherland Sewell and Associates Inc. highlighting a high estimate of 7,119MMbbl of OOIP and 361MMbbl of recoverable oil (net to RTD). Acquisition of 5,800 acres in North Slope and equity funding: On August 01, 2013, the company announced that it had agreed to acquire an interest in an additional 5,800 acres of prospective acreage contiguous to the Western Block. The acquisition was funded by the AU$1.75MM equity placement managed by Lead Manager DJ Carmichael Pty Limited. Alaskan project progress update: On July 29, 2013, the company announced that it was making rapid progress on the project. It said that CGG Veritas, front runner for the seismic work, had commenced the archaeological studies of the areas and administrative approvals process, which will enable timely execution of the exploration programs during 2014 and 2015 on the North Slope. Fundraising for Alaskan acquisition completed: On June 03, 2013, the company announced that it had successfully closed a financing of AU$1.8MM for the initial acquisition consideration of the Alaskan acreage. The funding included placement of 232.3MM fully paid ordinary shares at AU$ and unsecured loan of AU$1.2MM convertible into fully paid ordinary shares at AU$ per share. The placement and convertible loan offer includes share option attached to the offer. RTD Signs Major Deal for Alaskan Petroleum Play: On May 27, 2013, the company announced that it had signed an agreement to participate in the petroleum exploration in the prolific onshore North Slope of Alaska with Royale Energy Inc. Under the agreement, RTD, along with Royale Energy, will explore a 50,000 acre area for conventional and unconventional oil discoveries. RTD can earn up to 38,000 net acres across two contiguous blocks on achieving certain milestones. Rampart Energy Limited 5 ASX:RTD

6 Listing Information Rampart Energy (RTD) was listed on ASX under the name Fall River Resources Ltd in April The company was renamed and commenced trading under RTD ticker in May Contacts Registered office Suite 9, Lester Court, 75a Angas Street, Adelaide, SA 5000 Telephone Facsimilie info@rampartenergy.com.au Major Shareholders vii Equity Holder No. of Shares Held (MM) Percentage Holding (%) Washington H Soul Pattinson & Company Ltd % Torey Robert Marshall % SL Curtis Pty Ltd % Talltree Holdings Pty Ltd % Willowdale Holdings Pty Ltd % Rampart Energy Limited 6 ASX:RTD

7 Management and Governance The management team at RTD comprises of experienced professional with a proven track record. Personnel (Qualification) Raymond Shaw Torey Marshall Malcolm Lucas-Smith Designation Chairman Managing Director Director and Company Secretary Current and total experience Raymond Shaw is a geologist and geophysicist with more than 30 years of experience in the resources and energy sector, including oil, gas, and coal industries. He commenced his professional career as a petroleum explorationist with Shell Development Australia in Perth and later went on to work for various consulting groups. He provided extensive consultation to industry, government, and international aid agencies on a variety of resource projects throughout Australia and Asia, including the World Bank, Asia Development Bank, and Ausaid. Shaw holds a B.Sc (Hons.) and Ph.D from the University of Sydney and Dip Law (SAB). He is a member of the Australasian Institute of Mining and Metallurgy and the American Association of Petroleum Geologists. He is also a director of the ASX-listed Red Gum Resources Ltd. Torey Marshall is a geologist with broad-based technical and business development experience in petroleum, mineral, and geothermal sectors. Marshall is responsible for the company s energy strategy in petroleum and geothermal sectors. In his career, Marshall successfully executed various exploration programs as an exploration geoscientist in Australia, South America, Africa, and the Middle East. He held senior management positions in various private and public (unlisted) companies, besides working as a consultant. In his consulting practice, he developed strategies for, and acquired projects on behalf of a number of clients ranging from AU$1MM to AU$100MM). Some of the public and private companies he consulted to technically or otherwise assisted to build their businesses and enhance shareholder value include PetroChina, Woodside, Phoenix Oil and Gas Ltd, Australian Oil Company Ltd, Red Gum Resources Ltd, Great Artesian Oil and Gas Ltd & QGC Ltd (A BG Group Company). Marshall has a B.Sc (Hons) and M.Sc from University of South Australia and is a Chartered Professional member of the Australasian Institute of Mining and Metallurgy. He is an associate member of the American Association of Petroleum Geologists and a director of ASX-listed Red Gum Resources Ltd. Malcolm Lucas-Smith has over 40 years of experience in finance, executive and nonexecutive management, property development, corporate secretarial, and administrative services. He spent 12 years with State Bank of New South Wales and 18 years with property finance and property joint venture divisions of Westpac Bank s listed subsidiary Australian Guarantee Corporation Limited. Smith formed a corporate services business and provided consultation services to the corporate sector, assisting new startups and existing operations in proposing to list on the Australian Securities Exchange and providing local representative and registered office services for offshore entities. He is the company secretary of the following ASX-listed companies: Healthlinx Limited, and Red Gum Resources Limited. Rampart Energy Limited 7 ASX:RTD

8 Assets and Projects Company s Asset Portfolio Project location Project overview Primary Project North Slope Alaska - 10%, option to own upto 75% working interest; Oil Secondary Projects Fiale - 100% interest; Geothermal Energy Source: Company filings Source: Company filings North Slope, Alaska Company s interest: 10% (can earn up to 75%) Asset summary: The project covers a net acreage of 42,350 in the high potential North Slope in Alaska. The province is home to the second top shale play in the U.S. with a potential (technically recoverable) estimate of 849MMbbl to 2,000MMbbl and 50% to 5% probability, respectively. The shale oil estimates from Netherland Sewell and Associates Inc. highlights a high estimate of 361MMbbl and a best estimate of 125MMbbl of recoverable oil (net to RTD). This estimate does not cover the conventional potential of the acreage held by RTD and ROYL. RTD is on track to commence 3D seismic mapping in early 2014 on the Western and Central blocks. To fund the program, the company has completed an AU$4.45MM share placement in November 2013, and has secured an ACES based credit facility in December It is also reviewing farm-out opportunities available on the project, considering its high potential acreage. Target commodities: Crude Oil Location: The project is located to the south of the Kuparuk and Prudhoe Bay fields in North Slope, Alaska. The North Slope is a prolific Oil and Gas province and has attracted many oil and gas super majors such as British Petroleum, Conoco Phillips, Shell, Exxon Mobil and more. The project is located close to the Trans Alaskan and refinery infrastructure. Regional geology: According to USGS assessment, North Slope is unexplored for shaleoil and shale gas resources. There are three rock sources with Sapropelic, Sulfurous, Planktonic, and Humic Kerogen deposits, along with conventional oil deposits. North Slope, Alaska Potential mineralization: North Slope is known for the co-existence of conventional and shale plays; it is one of the last significant shale plays in the US. Conventional prospectivity: The project is near the Moose Tooth resource estimated to be up to 600MMboe. Jurassic sands are known to host this resource and extend into the projects acreage. Unconventional (Shale) prospectivity: In August 2013, Netherland Sewell and Associates Inc. carried out a resource assessment highlighting a high estimate of 7,119MMbbl of OOIP viii, 312MMbbl of recoverable oil (net to RTD). The estimates show: Rampart Energy Limited 8 ASX:RTD

9 Capex /boed Oil Price /bbl Estimate Type Gross Net to Rampart Low Estimate OOIP (MMbbl) Recoverable Best Estimate OOIP 3,799 2,851 (MMbbl) Recoverable High Estimate OOIP 9,485 7,119 (MMbbl) Recoverable The Shublik, HRZ and Kingak sections of Cretaceous and Jurassic stratigraphy were analyzed with data from existing wellbore penetrations, seismic and geological modeling. The resource assessment is being extended to include the conventional potential of the area. Internal Rate of Return (IRR): Our IRR analysis on the project highlighted a low estimate of 16%, best estimate of 20% and, high estimate of 37%. The analysis considered Oil Price per barrel, Cost of Production per barrel and Capex per boe/d as key variables. Key Variables Oil Price Cost of Capex per Production boe/d Low High Value The calculation was based on the low, best and high recoverable estimates with a 15% decline rate. A sensitivity analysis on the IRR (best estimate) based on Oil Price/bbl and Cost of Production/bbl ranged from 4% to 42% with a 5% increase/decrease in the variables. Oil Price/bbl vs Cost of Production/bbl Best Estimate Sensitivity Cost of Production/bbl 20% % 12% 9% 6% 4% 95 21% 18% 14% 11% 8% % 24% 20% 17% 13% % 30% 27% 23% 19% % 38% 34% 29% 25% The high estimate for the same highlights IRR in the range of 15% and 63%. Similar sensitivity based on Gross Earnings per bbl and Capex per boed shows the following: Gross Earnings/bbl vs Capex/boed Best Estimate Sensitivity Gross Earnings/bbl 20% % 10% 10% 12% 15% % 8% 8% 10% 13% % 8% 8% 10% 13% % 10% 10% 11% 15% % 13% 13% 15% 19% The high estimate for the same highlights IRR in the range of 15% and 63%. Agreement with Royale Energy: RTD signed an agreement to earn up to 42,350 acres in the project on May 27, The initial agreement was to earn up to ~38,000 acres; later on 5,800 (additional block in the western block) was appended but without the issuance of options to cover the split payment. RTD currently owns 10% of working interest in the western block, and will earn an additional 20% WI after completion of 3D seismic survey. RTD has to fulfill the following terms of agreement to earn WI: 10% WI in Western Block: Pay US$3.4MM in two tranches, by Dec 1, Also, issue options to Royale Energy Inc. worth US$1.7MM of Rampart stock at a strike price of 150% of VWAP (prior to the signature on the agreement). Additional 20% WI in Western Block: Complete 3D seismic survey over the Western and Central blocks by 31 March, Additional 45% WI in Western Block: Drill, test and complete two wells in the Western Block, including horizontal target formations by 31 March, % WI in Central Block: Complete 3D seismic survey on the Central block and pay US$1.7MM by 03 June, The company raised the amount through placement of 232.3MM fully paid ordinary shares at AU$ and convertible loan of AU$1.2MM for the acquisition of Alaskan Project. It also completed an AU$1.75MM equity placement in August 2013 to acquire of 5,800 acres of prospective acreage contiguous to Western Block. The Department of Natural Resources in Alaska encourages exploration and development in the North Slope and offers incentives in the form of reimbursements, and credits for allowable expenditures (not contingent on success of the exploration). Some of them are as under: Exploration Credit 30-45% of expenditure Up to 40% of loss carry forward Total 85% refundable credit for 2014, 2015 Up to 75% credits rebated for 2016 and 35% for the subsequent years Recent developments: Rampart is currently focused on obtaining the required approvals prior to the commencement of its drilling program, and, is close to completing negotiations with seismic contractors, along with Royale Energy. Rampart Energy Limited 9 ASX:RTD

10 In November 2013, the company raised AU$4.45MM through private placement and exercise of unlisted options. The proceeds will be used to fund the 3D seismic program, scheduled to commence in early 2014 and meet the final cost of its initial earn in. As part of the share placement, RTD raised AU$2.93MM and AU$0.65MM in two tranches (by issuing 45MM and 10MM shares, respectively, at AU$0.065 per share). It also raised AU$0.93MM through the exercise of 15.5MM unlisted options at a strike price of AU$0.06. In December 2013, RTD secured an ACES-based Exploration Rebate Working Capital Facility. The facility will significantly reduce the shareholder equity cost of exploration expenditure, as up to 85% of the exploration costs will be credited back through tax credit certificates issued by the Alaskan Government and can be passed through to a third party loan provider. The company has also commenced working on the formal close process of the seismic program, and expects it to close before seismic acquisition commencement. RTD estimates an expenditure of US$8MM for its 3D seismic program in The company also plans to drill two wells during 1H15, with an average cost of US$10-15MM per well. Project schedule: The company plans to commence 3D seismic acquisition on the Western and Central Block in early 2014 to conform to the terms of agreement. Regulatory approval processes, rig contract and a prospective resource assessment is also expected to be completed by early It also plans to commence a two-well drilling program in Activity 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Project Acq Options underwriting Seismic prep Seismic Acq Seismic Interp Drilling Prep Drilling Geoscientific review Farmout External results RTD is also reviewing farm-out opportunities available on the project, considering its high potential acreage. Fiale Project Company s interest: 100% Asset summary: RTD holds a non-core interest in the project and is expected to be divested in It has an agreement to explore and develop a major geothermal resource in the Rift Valley in Africa. The Rift Valley is considered to be one of the most strategic geothermal opportunities within the Africa Rift Valley, Lake Assal is an area of recent volcanic activity, known from drilling in the 1980s and has recently come under intense focus of international geothermal power players. Rampart Energy Limited 10 ASX:RTD

11 Technologies and Markets Crude Oil ixx Chemistry and Properties: Crude oil is a fossil fuel made from decaying plant matter that has been under pressure in the Earth s crust for many years. Crude oil is classified based on API gravity and sulfur content; higher gravity (light crude oil) and lesser sulfur content (sweet crude oil) are preferred. WTI is a light crude oil with an API gravity of around 39.6 and sulfur of 0.24%; hence, it is rated as a sweet crude oil. Brent Crude oil, with API gravity of and sulfur content of 0.37%, is rated second. Sources and Production U.S. is the second largest oil producer in the world, trailing Saudi Arabia (11.1MM bpd) and followed by Russia (10.4MM bpd) in Total oil supply (2012) hydrocarbons (Oil and Gas). OPEC, the oil cartel, holds ~80% of the world s oil reserves. OPEC controls the supply of world s oil and gas; it contributed to ~45% of world s crude oil production in Source: OPEC Proven reserves (2012) Demand xii : The Asia-Pacific region leads the world s crude oil demand at 33%, followed by North America at 26% and Europe at 16%. The Middle East holds world s major oil reserves, but consumes only 9% of the total world demand. Total Oil demand and supply ( 000 bbl/d) Source: USGS Texas, Alaska, California, North Dakota, and Oklahoma accounted for about 69% of U.S. oil production in Alaska North Slope contributed ~49% to the Alaskan production and ~8% to the U.S. production. The total U.S. production during 9M13 was around 2,004MMbbl. Of this, Alaska contributed 278MMbbl, or about 14%. Production from Alaska North Slope contributed 139MMbbl in 9M13, accounting for almost 50% of the total Alaskan production. Sources xi : World s oil reserves are concentrated in Arabian Gulf countries (more than 50% of world s proven reserves), owing to their unique geology. The region has thick stratigraphic units with rich and porous rock sequence that hold the Source: USGS Global oil demand is expected to increase ~1.0% in 2013 to 89.78MMbbl/d (2012: 88.92MMbbl/d), and is expected to reach 90.78MMbbl/d in Applications Crude oil is used to make a variety of fuels, including gasoline, diesel fuel, jet fuel, bunker fuel, and kerosene. It powers all the automotive vehicles and engine-powered machinery on the Rampart Energy Limited 11 ASX:RTD

12 planet. It is also widely used as a raw material in the chemical industry. In addition, petroleum and its derivatives are used in manufacturing medicines, fertilizers, foodstuffs, plastic ware, building materials, paints, cloth, and in generating electricity. Market Trends: Prices and drivers xiiixivxv Crude oil prices (WTI) have wavered since the beginning of 2013 with mixed trends in world economy. The prices peaked at ~US$108 in 2Q In 2013, positive data from industrial production in China and supply concerns supported price, amid the concerns on Fed s QE withdrawal by year-end. According to the EIA, the forecast WTI spot price fell to US$101/bbl in October 2013 (Sep 2013: US$106/bbl). Prices are expected to decline to US$97/bbl in 4Q13 and US$95/bbl in Oil price & production in the past six years The Shublik formation contains a mixture of Type I (Sapropelic) and II (Sulfurous) kerogen, and conventional oil accumulation with gravity in the range of API and sulfur content of more than 1.5%. The other two, Kingak and Brookian, shales contain a mixture of Type II (Planktonic) and III (Humic) kerogen. The conventional oil extracted from these shales had a gravity of API and sulfur content of less than 0.3%. North Slope - formations Source: EIA In the long term, WTI prices are expected to be around US$ in 2020 and grow to US$ in 2040, recording an annual growth rate of ~1.3%. xvi xvii North Slope - Alaska An assessment by USGS on oil and gas resources in three source rocks of the Alaska North Slope showed the presence of conventional and shale oil. The three rock formations assessed were the Triassic Shublik Formation, the Jurassic Lower Cretaceous Kingak Shale, and the Brookian Shale. Technically recoverable Shale oil and gas, and natural gas liquid from the three rocks are: Technically recoverable oil and API Formation Type MMbbl/Bcf API Shublik Brookian Kingak Shale Oil 0-928MMbbl 24 Shale Gas 0-981Bcf - NGL 0-26MMbbl - Shale Oil 0-955MMbbl 40 Shale Gas 0-1,996Bcf - NGL 0-51MMbbl - Shale Oil 0-117MMbbl 38 Shale Gas 0-238Bcf - NGL 0-6MMbbl - The North Slope ranks second among the top U.S. shale plays based on the mean estimate of technically possible oil production. The potentially recoverable oil is estimated to be in the range of 849MMbbl to 2,000MMbbl with probability of 50% to 5% attached, respectively. Rampart Energy Limited 12 ASX:RTD

13 Project Risk Profile Analysis We believe that RTD has a medium risk profile compared to its peers. The company is into exploration stage, and backed by potential high quality reserves, government support and incentives, management expertise we believe that RTD is relatively low on all the major four risk parameters. Peer Risk Analysis We have evaluated the risk profile of RTD compared with other exploration companies possessing a similar commodity base. We identified the risk as Low/Medium/High and assigned a score of 1/2/3 respectively based on the risk profile of the major projects pursued by the companies. The important risk categories considered for the study include Project Maturity Risk: LOW - Near production; HIGH Feasibility study stage Financing Risk: LOW - Near negotiations / lower exploration capex; HIGH - Funding need for exploration or no well-known funding sources Operational Risk: LOW high quality resource and mid stages of lifecycle; HIGH- low quality resource and initial stages of lifecycle. Key Personnel Risk: LOW Management having good prior experience in same industry; HIGH Management having lesser number of experience (also takes into account the dependability factor) The individual risk parameters and the underlying rationale for the scores are discussed in the subsequent sections. Peer Risk Profile Ticker Total Risk Score Project Stage Risk Financing Risk Operational Risk Key Personnel Risk RTD AU AKK AU POLR US TSV AU WHN AU BSPE US North Slope, Alaska RTD has a relatively high project stage and operational risk, while it fares relatively better in terms of financing risk. Risk Stage Project Stage Risk Financing / Capex Risk Operational / execution Risk Key personnel Risk Hypothesis RTD is in its initial stages of exploration with ongoing plans for 3D seismic mapping on the western and central block. Recent independent resource estimation shows a potential high estimate of 361MMbbl of recoverable oil in the blocks (net). Considering this, we have rated RTD as medium to high risk in Project stage. The company has low debt and has backing of strong private players. Also, Alaskan government provides rebates and incentives to explore in North Slope which is not contingent on the success of the project. North Slope project qualifies for 40% to 85% of the exploration expenditure credits, placing the company in a very comfortable position with respect to financing in its exploration phase. In November 2013, the company raised AU$4.45MM through a private placement and an exercise of unlisted options. In December 2013, it secured an ACES based credit facility, which will significantly cover seismic and drilling costs. Based on these, we have rated RTD as low to medium risk in financing risk parameter. North Slope is known for existence of dual plays with API gravity in range of 20-45, attracting low discount on the oil by refiners. Also North Slope has a pipeline and refining infrastructure which is underutilized; RTD can capitalize on these as it moves to production. Also, given support RTD will receive from ROYL we believe the former will be able to execute the project plan in a timely and orderly fashion we consider RTD to be in low to medium risk range. We understand RTD might face Key personnel risk considering it has a small board of directors, thus limiting scope for planning and implementing decisions at a larger forum. However, with the strong management team and support from ROYL brings down the risk for RTD significantly. Rampart Energy Limited 13 ASX:RTD

14 Risk Parameters Definition Project Stage Risk The different stages in an oil and gas project are: Stage 1: Feasibilty study and drilling. The company conducts a feasibility study and drills an area to test the potential resource content in a particular project. After it hits a fracture, it gets into a position to estimate whether the project has sufficient quantity of oil and gas to be explored. This includes doing a cost-benefit analysis. Stage 2: Construction of well. After the testing of the sample and confirmation on the feasibility of the project, the company constructs the well- vertical or horizontal, as per the requirement. This helps it to determine the proven, probable and possible reserve. Stage 3: Production and extraction of oil and gas. The company after constructing the wells, extracts oil and gas. This is then followed by the separation, conversion and treatment process. Transporting raw oil is a highly technical midstream process that involves compressing the fluids to necessary pressures to be transported through pipelines. We consider a project to be of lower risk profile if construction of wells is complete and production has been started as the uncertainty regarding the sustainability of the project reduces significantly. Project Financing Risk Every project requires a huge amount of initial capital expenditure, not only at the testing stage but also at the exploration stage. Normally, the project takes years to kick start production, after the feasibilty study is completed. During this period, the company has huge amount of funds locked up and is yet to generate a cash flow. Thus the risk becomes huge. If the company already has other projects which is generating good cash flows, then it has an option to utilise those funds towards other projects and rely less on extrernal sources of funds to meet its working capital requirements. We consider a project to be of lower risk profile if the company has existing projects generating cash flows and the exploration capital expenditure is low. Operational Risk The oil and gas companies have a certain amount of recoverable oil and quality of oil content, which largely varies. We believe that the oil content and quality contributes more towards the cash flows of any project. Also, given the fact that the oil prices can be hedged, a company can mitigate its downside risk and at the same time capitalize on the upside price movement. We consider a project to be of lower risk profile if it has a higher quality and higher recoverable oil content. Key Personnel Risk The company is run by its management who brings prior experience and knowledge to the table. Also, it is important that a company does not rely heavily on very few individuals who have vast experience in the field. We consider a project to be of lower risk profile if the management team is highly qualified, has good number of years of experience in oil and gas field and has lesser dependability on few people. Peer Valuation and Risk Profile We have also evaluated the companies based on the value per resource and the risk profile. Enterprise Value per Resource has been evaluated. AU$/boe unit has been used as a proxy for the valuation measure. The Risk Profile has been assessed as a weighted blended score based on project stage risk (40% weightage), financing risk (30%), operational risk (20%) and key personnel risk (10%). The individual risk score have been provided in the risk profile table in the Peer Risk Profile table in the previous section. Valuation Vs Risk Profile Chart Rampart Energy Limited 14 ASX:RTD

15 Valuation Vs Risk Profile xviii Company Total Risk Score Enterprise Value/ Resource (AU$/bbl) Enterprise Value (AU$MM) Total Resource (bbl) RTD AU AKK AU POLR US TSV AU WHN AU BSPE US Based on our analysis RTD demands a premium as compared to its peers considering the overall low-medium risk profile. We expect RTD to significantly scale down on the risk score as it moves closer to the development/production stage. Rampart Energy Limited 15 ASX:RTD

16 Value The Fair Market Value for RTD shares stands between AU$27.70MM and AU$117.89MM. The Fair Market Value for one of RTD publicly traded shares stands between AU$0.11 and AU$0.45. Rampart Energy Limited Balance Sheet Forecast CONSOLIDATED BALANCE SHEET all figures in '000 AU$, unless stated differently Low bracket estimates year ending Sep 30 th 2014E 2015E 2016E 2017E 2018E 2019E 2020E Total Current Assets 5,706 3,398 7,421 11,266 93, , ,480 Total Non-Current Assets 16, , , , ,315 89,353 75,899 TOTAL ASSETS 22, , , , , , ,379 Total Current Liabilities ,297 37,905 32,219 Total Non-current Liabilities 15, , , , ,000 75,600 52,920 TOTAL LIABILITIES 15, , , , , ,505 85,139 Total Shareholders Equity 7,292 6,010 6,277 9,044 71, , ,240 TOTAL LIABILITIES and EQUITY 22, , , , , , ,379 RTD Comparables The Comparable Resources valuation uses Peers resources, project stage and Enterprise value to arrive at the fair share valuation for RTD. The peers have been identified on the basis of similar resources and/or region of operation. The valuation is done using regression analysis between the grade of the resource or project stage and EV/Resource of the comparables. We have used the resource grade or project stage depending on the correlation factor between the resource grades or project stage and EV/resource of the peers. Estimated Enterprise Value Estimated Ticker Company Resources (AU$ MM) EV/Resources (MMbbl) AKK AU Austin exploration Limited COP US Meltwater Oil Field xix COP US Tarn Oil Field xx POLR US Polar Petroleum Corp WHN AU WHL Energy BSPE US Black Sands Petroleum Important information on Arrowhead methodology The principles of the valuation methodology employed by Arrowhead BID are variable to a certain extent, depending on the sub-sectors in which the research is conducted. But all Arrowhead valuation researches possess an underlying set of common principles and a generally common quantitative process. With Arrowhead commercial and technical due diligence, the company researches the fundamentals, assets and liabilities of a company, and builds estimates for revenue and expenditure over a coherently determined forecast period. Elements of past performance such as price/earnings ratios, indicated as applicable, are mainly for reference. Still, elements of real-world past performance enter the valuation through their impact on the commercial and technical due diligence. Rampart Energy Limited 16 ASX:RTD

17 We have also presented the comparables method based on market capitalization per resource of ton (AU$/bbl) as a secondary measure of fair value, which, though is not central to the methodology applied towards building the fair value bracket, is presented here as additional information. Arrowhead BID Fair Market Value Bracket The Arrowhead Fair Market Value is given as a bracket. This is based on quantitative key variable analyses such as key price analysis for revenue and cost drivers or analysis and discounts on revenue estimates for projects, especially relevant to projects estimated to provide revenue near the end of the chosen forecast period. Low and high estimates for key variables are produced as a valuation tool. In principle, an investor comfortable with the high brackets of our key variable analysis will align with the high bracket in the Arrowhead Fair Value Bracket, and, likewise, in terms of low estimates. The investor will also note the company intangibles to analyze the strengths and weaknesses, and other essential company information. These intangibles serve as supplementary decision factors for adding or subtracting a premium in investor s own analysis. The bracket should be taken as a tool by Arrowhead BID for the reader of this report and the reader should not solely rely on this information to make his decision on any particular security. The reader must also understand that while on the one hand global capital markets contain inefficiencies, especially in terms of information, on the other, corporations and their commercial and technical positions evolve rapidly. This present edition of the Arrowhead valuation is for a short to medium-term alignment analysis (one to twelve months). The reader should refer to important disclosures on page 19 of this report. Information on the Rampart Energy Limited valuation Rampart Energy Limited Valuation Methodology: The Arrowhead fair valuation for RTD is the blended price of the comparable Resource Based Valuation method (RBV) and Discounted Cash Flow Valuation Method (DCF). Time Horizon: The Arrowhead fair valuation for Rampart Energy Limited is based on a DCF method. The time period chosen for the valuation is 142 months ( ). While revenue is expected to ramp up significantly during the , the later years are heavily discounted and have a marginal effect on valuation, which are included primarily to present a full project cycle situation. Terminal Value: Terminal Value is estimated to depend on a terminal growth rate of 0%, representing the maturity, technology change and prospective competiveness in the business. Prudential Nature of Valuation: This Arrowhead Fair Value Bracket estimate is a relatively prudential estimate, as it discounts the eventuality of the company acquiring and producing from any projects other than North Slope before Rampart Energy Limited 17 ASX:RTD

18 Key variables in Rampart Energy s revenue estimations Variable 1 - Hypothesis for production Resource (MMbbl) Western Block - Central Block - Shale xxi Shale xxii Conventional Oil xxiii Low High Variable 2 Commodity price Oil (US$/bbl) 2014 Low 90 High 100 Variable 3 Cost of production Oil (US$/bbl) 2014 Low 65 High 55 Variable 4 Exchange Rate US$ - AU$ 2014 Low 1.00 High 1.05 Rampart Energy Limited 18 ASX:RTD

19 Analyst certifications I, Mohanarangam Purushothaman, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security and the subject company. I, Vishal Pasari, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security and the subject company. Important disclosures Arrowhead Business and Investment Decisions, LLC received fees in 2013 from Rampart Energy Limited for researching and drafting this report and for a series of other services to Rampart Energy Limited, including distribution of this report and networking services. Aside from certain reports published on a periodic basis, the large majority of reports are published by Arrowhead BID at irregular intervals as appropriate in the analyst s judgment. Any opinions expressed in this report are statements of our judgment to this date and are subject to change without notice. This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, any of the financial or other moneymanagement instruments linked to the company and company valuation described in this report, hereafter referred to as the securities, may not be suitable for all investors. Investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors are advised to gather and consult multiple information sources before making investment decisions. Recipients of this report are strongly advised to read the information on Arrowhead Methodology section of this report to understand if and how the Arrowhead Due Diligence and Arrowhead Fair Value Bracket integrate alongside the rest of their stream of information and within their decision taking process. Past performance of securities described directly or indirectly in this report should not be taken as an indication or guarantee of future results. The price, value of, and income from any of the financial securities described in this report may rise as well as fall, and may be affected by simple and complex changes in economic, financial and political factors. Should a security described in this report be denominated in a currency other than the investor s home currency, a change in exchange rates may adversely affect the price of, value of, or income derived from the security. This report is published solely for information purposes, and is not to be considered as an offer to buy any security, in any state. Other than disclosures relating to Arrowhead Business and Investment Decisions, LLC, the information herein is based on sources we believe to be reliable but is not guaranteed by us and does not purport to be a complete statement or summary of the available data. Arrowhead Business and Investment Decisions, LLC is not responsible for any loss, financial or other, directly or indirectly linked to any price movement or absence of price movement of the securities described in this report. Rampart Energy Limited 19 ASX:RTD